Anti-forestalling provisions have been introduced in the Autumn 2024 budget to prevent individuals from benefitting the lower capital gains tax rates before the date of the 30 October 2024. The provisions are contained in Sch. 2 FA 2025.
Revised CGT Rates
New CGT rates have been introduced for non-residential disposals made on or after 30 October 2024. The basic rate goes up from 10% to 18% and higher rate from 20% to 24%. The rate for BADR will increase to 14% from 10% for disposals from 6 April 2025 and 14% to 18% for disposals after 6 April 2026.
Anti-Forestalling
If an asset is transferred after the 30 October 2024 but would be treated as taking place before that date under an unconditional contract due to TCGA92 S28, the disposal will take place on the date of transfer rather than the contract date unless it is excluded contact.
A contract is an excluded contract:
(a) obtaining an advantage by reason of the application of section 28(1) of TCGA 1992 was no purpose of entering into the contract,
(b) and (b) where the parties to the contract are connected persons, the contract was entered into wholly for commercial reasons.
Schedule 2, Part 2, Para 7(1)(2)
It is not automatic for a contract to be excluded as a statement must be provided to HMRC with the claim that it is an excluded contract. This is not required if the disposal is not more than £100K.
Schedule 2, Para 7(3)(4)
If a disposal qualifies for BADR with an unconditional contract before 30 October but transfers after 5 April 2025, the disposal takes place at the date of transfer unless it is an excluded contract. Schedule 2, Para 11
If a disposal qualifies for BADR with an unconditional contract entered after the 30 October 2024, but before the 5 April 2025 with the asset transferring after April 2025, the disposal takes place at the date of transfer unless it is an excluded contract. Schedule 2, Para 12
If a contract is entered into in the 25/26 tax year and transferred after the April 26, the disposal will take place at the date of transfer unless it’s an excluded contract. Schedule 2, Para 13
An excluded contract for BADR purposes can be found at Schedule 2, Para 14.
There are further anti-forestalling provisions in relation to BADR when there has been a reorganisation. Para 15 to 18
Mr A
Your client appears to have entered an unconditional contract before the 30 October 2024 to take advantage of the rules under TCGA92 S28 with no commercial purpose so will not be an excluded contract.
As a result, your client will pay capital gains at rate of 24% as the disposal will take place on the date of transfer in April 25 and not the date of contract on 15 October 2024. A difference of £24,000 (24% rather than 20%) in capital gains tax on the £600K gain (ignoring AEA).
Mr B
On face value it does not appear that Mr B has entered the contract for the purpose of obtaining a tax advantage by TCGA92 S28 therefore a rate of 20% will be applied if he makes the claim along with a relevant statement.
If he fails to make the claim, he will be charged a rate of 24%.
Mr C
If the transfer happens before the 5 April 2025, the rate of BADR will be at 10%, but if it happens after the 5 April 2025 the disposal will take place at the date of transfer and subject to the increased rate of 14%. I don’t believe it would fall to be an excluded contract as it appears to be entered into the purposes of getting the lower rate of BADR using the rules under TCGA92 S28(1). This would fall under Para 12 of Schedule 2.
Please note the above does not cover every situation under anti-forestalling so please review the Finance Act 2025.
You can find out HMRC’s interpretation for the date of disposal under contracts at CG14250 and CG14261.
